How to Navigate Patent and Trade Secret Protection

The Differences Between Patent and Trade Secret Protection

Patents and trade secrets protect the ideas a business or an entrepreneur has. There are five primary differences.

First, a patent gives the holder a monopoly over the commercialization of the idea, enforceable against anyone who has not yet obtained a license from the patent holder. A trade secret is only enforceable against those to whom the trade secret was disclosed in confidence under a confidentiality agreement, or people affiliated with such persons. If a complete stranger comes up with the same idea, you the trade secret holder have no recourse.

Second, a patent can only be obtained over specific types of innovations, and those are being drawn ever narrower (35 U.S.C. 101). Trade secret protection can be claimed over almost anything, so long as it is information that is secret, is used as part of the business to drive revenue or is otherwise valuable, and is capable of being kept non-public through lawful contractual or physical means.

Third, a patent only lasts 20 years—often it is effectively less than that because of the years it may take to commercialize the product or process. A trade secret can last forever, as long as it is effectively maintained as a trade secret.

Fourth, patent applications require one to disclose the invention in the patent to those capable of replicating. This is the bargain under patent law: teach the invention to the world and you can have an exclusive monopoly for a period of time, after which it comes into the public domain. Trade secrets on the other hand, once secret, remain that way for as long as one can keep them a secret.

Finally, a patent is subject to construction after the lawsuit begins. It is subject to a “Markman” hearing where the claims alleged to have been infringed undergo a legal argument about what they mean. This is often outcome-determinative, and courts with patent “rocket dockets” tend to speed things along initially with standing orders to get to the Markman hearing. Trade secrets on the other hand are flexible, subject to whatever the holder can demonstrate was confidential and valuable.

Issue	Patent	Trade Secret
Viability	Enforceable against any third party who violates one or more of the patent claims.	Only enforceable against those who have a received the information in confidence and have breached the duty of confidentiality.
Scope	Limited to “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” under 35 USC 101.	No subject matter limitation.
Duration	20 years	Unlimited duration as long as idea can be kept secret.
Prerequisites	Must disclose or “teach” the invention to those “skilled in the ordinary art”	Must simply keep it confidential, and use reasonable means to maintain confidentiality once disclosed to others.
Enforcement	Subject to construction for scope of invention claimed.	Subject to proof of confidentiality and value.

 

Innovation in the Use of Patent and Trade Secrets

Given the relative advantages, companies have begun to use hybrid strategies, combining the use of patent and trade secret protections for the same things.

Patent is for those elements of their inventions that require patenting—e.g., those potentially subject to independent invention by a competitor, or that could be subject to reverse engineering by a competitor, or where dissemination of the confidential information is too difficult or costly to control.  For the other critical elements that can be kept confidential, they use trade secret protections. For example:

Pharmaceutical companies have begun patenting molecules, active ingredients, or mixtures of ingredients, while maintaining trade secrets over the processes for manufacturing or synthesizing certain molecules, manufacturing formulas or recipes, and optimization processes.

Software companies have begun patenting code, but then using trade secret protection for the uses and deployment of multiple code together.

Manufacturing companies have begun to patent only formulas, materials and compounds—while reserving patent protection for designs of new innovations in machining technology, layout and design.

By using this combined approach, they can obtain the advantages of both the monopoly granted under patent and the longevity granted to them under a trade secret scheme.

Do You Have Questions About How To Strategically Manage Your Patent and Trade Secret Protections? Speak to an Expert Immediately.

If you are like other businesses or entrepreneurs, and find yourself with questions about your protecting your businesses innovation using patent versus trade secret protections, do not hesitate to contact us. Mr. Sbaiti’s direct line is (214) 432-2899.